The loss ratio is the percentage between claims costs you've incurred and your pro-rata premium. As your policy progresses this figure will naturally decrease, while additional claims costs will cause it to increase.
Insurance companies use the loss ratio to assess the risk associated with a particular policy. We want to reward the safest fleets with access to rebates, which is why we have a threshold loss ratio.
In general, the loss ratio can be an important factor for insurance customers to consider when comparing policies from different companies. A policy with a lower loss ratio may ultimately result in lower premiums and greater savings for the customer over the long term.